“My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today.”

– Bob Rubin, explaining his decision to leave Citigroup , in a letter today to CEO Vikram Pandit. Rubin joined Citigroup in 1999, after serving as Treasury Secretary in the Clinton Adminsitration. As my colleague Carol Loomis has written, he’s the rare executive who moved from business – in his case, the helm of Goldman Sachs –  to Washington and back to business with his reputation not just intact but enhanced.

Rubin’s mighty fall came at Citi. He’s been pummeled for his extravagant pay, which he got despite a lack of operating duties. (He made $17.3 million in 2006, when he was chairman of Citi’s executive committee.) The reputational damage has only increased as Citigroup’s problems have piled up. Now, with Rubin departing, every senior executive from the Sandy Weill era is gone from Citi except one: chairman Win Bischoff.

In his letter, Rubin told the board that he intends “to intensify my engagement with public policy.” He isn’t expected to take a formal position in the Obama Administration, though he’s been advising the President-elect. Perhaps more time in Washington could burnish Rubin’s reputation again? — Patricia Sellers